Offshoring And Outsourcing, What Is The Difference?

The terms outsourcing and offshoring are buzz words in the corporate world. Both terms are often interchanged and often used incorrectly. This article will introduce these keywords and provide an understanding of the main differences between them.

Outsourcing

Obtaining the services of a third-party entity to carry out certain activities of a business is referred to as Outsourcing. The third-party company will hire their own staff, software, and other resources to complete a given task. In addition, this task will need to be completed to the timescales defined by the Service Level Agreement or SLA. This is usually agreed upon before starting the project.

During the early days, most business would outsource some of their activities to companies that are located locally. This helped them save money and time, allowing them to invest these resources in other business generating activities. However, with the advancement of technology in telecommunication and logistics, businesses envisioned that they can reap more savings by outsourcing the same to emerging nations such as India, China, and the Philippines. Most often tasks or business processes that were simple were outsourced. Among this data entry, manufacturing, call centre was the popular options.

Offshoring

Governments in the emerging nations saw that outsourcing as a major income generator and invested in producing a more skilled workforce that can take on skilled work such as virtual assistant Manila, back-office operations, and software development. As a result, the concept of offshoring was bornWith the offshoring model, the business would relocate their activities to another location, that is in a different geographical boundary.

For example, a telecommunication company in Australia offshoring to Philippines their call centre operations. This means the company employs staff from both locations and share resources such as software and staff. Although at first there were many cultural and communication issues with offshoring, the governments in the merging nations invested in producing more skilled labour force to cater to the demands of offshoring companies. As a result, this became a win-win situation for both the business and the countries.

Offshoring vs Outsourcing?

Deciding on whether to offshore or outsource can be a confusing task, as there are many factors to consider. For example, small businesses may not have the required funds to set up offshore sites for their business activities. In such an instance, the best option would be to outsource their activities to a trusted partner, located offshore. This is known as offshore outsourcing and utilises the benefits of both outsourcing and offshoring.It is recommended to consult an expert to find out which method works best, before engaging themselves in unfamiliar territory.